HMRC recently published the consultation on a General Anti-Abuse Rule (GAAR) for the UK.

By way of background, in December 2010, Graham Aaronson QC was asked by the UK Government to report on whether a general anti-avoidance rule would be beneficial for the UK tax system. That report was published on 21 November 2011 and it concluded that introducing a broad spectrum general anti-avoidance rule would not be beneficial to the UK tax system, and instead recommended the introduction of a rule targeted at abusive arrangements.

The Government announced at Budget 2012 that it accepted this recommendation and would consult with a view to bringing forward legislation in Finance Bill 2013 that was both effective in tackling artificial and abusive avoidance schemes and also practical both for taxpayers and HMRC.

The consultation therefore outlines proposals to include taxes within the scope of the GAAR where inclusion would not add significant complexity to the GAAR or underlying legislation, and where there is significant avoidance risk.

It is intended that the GAAR will apply where both a “tax arrangements” test and an “abusiveness” test are met with the tax advantage, after procedural requirements are met, counteracted on a ‘just and reasonable’ basis.

Annex B of the consultation lays out examples of artificial and abusive tax avoidance schemes that HMRC considers would be appropriate targets for application of the GAAR with the Draft GAAR included in full in Annex D of the consultation. The consultation also sets out the Government's proposals for how the GAAR would be implemented.

The consultation is available in full on the HMRC website, http://customs.hmrc.gov.uk

Comments are requested by 14 September.